Health Care Costs Are Cutting into Retirement Preparations

Posted on February 19, 2020 by ngfmarketing.

You may have seen this statistic before or one resembling it: the average 65-year-old retiring couple can now expect to pay more than $250,000 in health care expenses during the rest of their lives.

In fact, Fidelity Investments now projects this cost at $285,000. The effort to prepare for these potential expenses is changing the big picture of a retirement strategy.[1]

Individual retirement savings strategies have been altered. How many people retire with a dedicated account or lump sum meant to address future health costs? Probably very few. Many retirees end up winging it, paying their out-of-pocket costs from their incomes, Social Security benefits, and savings.

While couples can save together, individuals also have considerable health care costs as well. Fidelity estimates the costs as $150,000 for women and $135,000 for men. The costs can potentially take up a considerable amount of a retiree’s income – 9% to 14%, according to Fidelity. Per year, out-of-pocket costs, including dental and vision, could run from $3,000 to $8,000 during an average year.[2]

While households have begun adjusting their retirement expectations, considering their projected health care expenses, businesses have also quietly made some changes. If you can take advantage of employer matching contributions to your workplace retirement account, take advantage of that benefit.

There is no easy answer for retirees preparing to address future health care costs. Staying active and fit may lead to health care savings over the long run, but some baby boomers and Gen Xers already have physical ailments. Barring some sort of unusual economic phenomenon or public policy shift, the question of how to pay for hundreds of thousands of dollars of medical and drug expenses after 65 will confound many of us.

“Act as if what you do makes a difference. It does.”

– William James

Recipe of the Week

Zippy French Toast

Serves 4
Ingredients:
  • 1 tsp. cinnamon
  • ¼ tsp. nutmeg
  • 2 Tbsp. sugar
  • 4 Tbsp. butter
  • 4 eggs
  • ¼ cup whole milk
  • ½ tsp vanilla extract
  • 8 slices of your favorite bread
  • ½ cup warm maple syrup
  • 2 cups berries or favorite fruit
Directions:
  1. In large bowl, mix spices and sugar.
  2. Add butter to skillet over medium heat
  3. Beat eggs with milk, vanilla, spice and sugar mix.
  4. One at a time, immerse each bread slice to the egg, and then fry each side in skillet.
  5. Garnish with berries and add syrup.
  6. Serving suggestion: Jam or preserves make a nice change from syrup and berries.

Recipe adapted from foodnetwork.com[3]

Tax Tips

4 Facts About Capital Gains

When you sell a capital asset like an investment or a piece of property, the sale can result in a capital gain or loss. The IRS defines a capital asset as “most property you own for personal use or own as an investment.” Here are four facts you should know about capital gains:
  1. A capital gain or loss is the difference between what you originally paid for the asset (your basis) and the amount you get when you sell an asset.
  2. You must include all capital gains in your income, and you may be subject to the Net Investment Income Tax if your income is above certain amounts. Consult a qualified tax expert for help.
  3. The IRS allows you to deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
  4. If your total net capital loss is more than the limit you can deduct, you can carry it over to next year’s tax return.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov[4]

Golf Tip

The Myth of Always Hitting Your Regular Distance

H. Hugh Briss, who plays golf every weekend at the local country club, faces a 170-yard approach shot over a pond. When he’s going good, Hugh can hit a 6-iron 170 yards. He selects his 6-iron. He hits it a little fat, and the ball plops into the water. Hugh, now peeved, was so confident he could reach the green.
Truth be told, Hugh was overconfident. He failed to account for a simple fact: we don’t hit our regular distance all the time. Our approach shots often don’t carry as far as we assume they will. When you really need to carry a hazard, take one club more than you think you might need. You might like the results. Remember, there is usually less trouble behind a green than in front of it.
Tip adapted from Pipestone Golf[5]

Healthy Lifestyle

Eating To Your Heart’s Content

Deciding to change your diet can feel daunting. It can be difficult to figure out which one is “best” for you. Many fad diets come and go, but there are a few that have stuck around, the most popular being the Mediterranean diet.
The Mediterranean diet is less of a traditional diet and more of a lifestyle shift toward healthier eating patterns. It’s modeled after principles of Italian and Greek cuisine, which have remained relatively unchanged since the 1960s. Consuming this diet has been correlated with lower rates of heart disease, type 2 diabetes, and other chronic illnesses. The diet emphasizes eating more fruits, vegetables, legumes, nuts, seeds, fatty fish, whole grains, and olive oil and fewer meats and dairy products. The diet is flexible. Elimination isn’t the intention, rather balance more toward nutrient-rich foods versus energy-dense ones.
Food is life, and making healthy choices can help support a healthier life. While the Mediterranean diet could be a good option for someone, no single diet will fit everyone’s lifestyle, preferences, and health needs perfectly. So, be sure to discuss any dietary choices you make with your physician or registered dietitian first.
Tip adapted from Healthline.com[6]

Green Living

Upgrading to an Eco-Friendly Fridge

Is your refrigerator running? If it’s more than 10 years old, it may be time to upgrade with a more eco-friendly model. Besides saving money on your electric bill, you’ll be reducing your carbon footprint at the same time.
The most efficient models, according to Energy Star, are refrigerators with freezers located on the top. It doesn’t seem like a small change, but models with freezers on the bottom use an average of 560kWh compared to 360kWh.
The other big energy saver is to buy a model with LED lights. LED lights are roughly 80% more efficient than traditional light bulbs, which will reduce your energy consumption even further.

Tip adapted from Green Living Ideas[7]